Placing a value on change

Barcelona's industry is responding to global competition by putting
an emphasis on skills, technology and efficiency, says Juan Ramón
Ramos, Landwell managing partner based in Madrid and Barcelona.

Despite the economic change that
has come over Barcelona and
Catalonia in recent years, it
remains Spain's leading industrial
centre, and its second-most important centre
for services, says Juan Ramón Ramos,
Landwell managing partner based in Madrid
and Barcelona.

'From an economic point of view, Spain's
integration into the EU has brought with it
rising international investment, rising living
standards and salaries – and Catalonia is
among the regions to have most benefited.'

It is perhaps inevitable however, that such
economic success may counteract some of
the initial attractions of the country, he says,
with certain aspects of foreign investment
having decreased since the accession in to
the EU of Central and Eastern European
countries with their cheaper labour costs.

'There has clearly been an impact on
Barcelona's manufacturing sector, in which
respect we have assisted some local clients
move their operations across Europe and the
North of Africa. But this is a global issue. All
of the European economies are themselves
facing competition from the Far East, notably
China, with its even lower production costs –
and perhaps lower quality output.'

International tax issues have also come
into play, he adds. 'The introduction of tax
and investment incentives, and the ability of
companies to capitalise on them, has also
helped some companies to delocalise.

Value-added

But a clear response within the region has
been to increase skills and efficiency of
output, with a number of manufacturers now
enjoying increased local productivity. Seat,
he notes, which moved temporarily part of
its Spanish production to the Czech
Republic, now operates one of Europe's most
efficient car production plants at Martorell,
on the edge of Barcelona – producing 2,000
units a day.

Reflecting the increasing importance of
research and development across the region,
the plant also now incorporates Seat's global
design centre, which it operates in
collaboration with the Barcelona business
school ESADE (Escuela Superior de
Administración y Dirección de Empresas)
and Pasedena's Art Center College of Design.

'We are seeing an increase in the
emphasis on local talent – a number of
companies that had considered relocating
their operations, even elsewhere within
Spain, have begun to reassess their strategies
as a result of higher than expected transfer
costs and the potential loss of talent that
would result,' he says.

The dramatic fall in Spanish residential
and real estate values is also having an
impact, Ramón notes, with a decline in new
construction projects regionally.

Nonetheless he sees new business
opportunities across the construction and
real estate sector, including the acquisition of
property portfolios and other assets. The
collapse of some real estate companies,
which owns prime commercial real estate
across the Mediterranean, he suggests is
reflective only of the prevailing credit
conditions.

'The current economic climate is placing
severe pressure on companies balance sheets,
which in turn has forced some to look for cash
injections, or to renegotiate loan agreements
with banks and financiers. A lot of companies
are asset-rich but cash-poor – this brings a
rising amount of refinancing, restructuring, tax
reorganisation work, and legal advice even on
failure of payment procedures.

In addition, Ramón sees opportunities
emerging from Barcelona's vacated former
industrial sites. 'Brownfield redevelopment
opportunities are emerging, as many factory
sites have been absorbed into towns and
consequently sit on prime real estate.'

He notes however that while there may be
few public redevelopment incentives to
encourage new business investments, Spain's
personal tax regime does offer incentives,
and which cumulatively helps add to the
region's attraction as a base for multinational
operations.

'The 25% flat rate over five years is a
major advantage for foreign executives. Many are happy to come to Barcelona,
to live
near the sea, and enjoy the benefits on offer.' Service and knowledge-based industries
now account for an increasing proportion of
the Catalan economy, he states. 'It is part of a
logical evolution, to move away from an
economy dominated by primary industries to
one offering more value-added services.'